All You Need to Know About Outsourced Bookkeeping Services

John is the owner of an accounting firm called Cuspid Solutions. At first, he only has a handful of clients (which he gets by putting in a lot of effort). Over time, his small business expands, thanks to excellent service and referrals from satisfied customers.

Soon, he’s serving many clients, ranging from small and medium-sized businesses (SMBs) to sizeable corporations. He even has plans to start offering Client Accounting Services!

But this growth comes with a problem: a significant increase in workload, more than his team can handle. Come peak financial season, his office is in a frenzy. Accountants are scrambling to audit various clients’ financial operations, prepare complex tax returns, and perform meticulous bookkeeping services. This leaves the team stretched thin and stressed.

At the same time, he’s spearheading the transition to offer CAS. His team is attending training sessions amid their hectic schedules to stay updated with the latest financial planning techniques. The firm is also investing significant time and resources into this expansion because it envisions a future where it can provide strategic guidance besides accounting services.

John can feel the strain, the pressure building. It leaves him wondering how long his team can keep this pace without faltering.

Does this scenario strike a chord? We thought it might.

Whether you’re experiencing this today or foreseeing it on your firm’s horizon, know that you are not alone. And there’s a solution to this problem i.e., outsourcing bookkeeping tasks.

Today, we’re addressing how to ease the workload and set your CPA firm for the next phase of success. Here’s all you need to know about outsourced bookkeeping.

What is Outsourced Bookkeeping?

Outsourced bookkeeping is a growing trend among accounting and CPA firms. It is when you hire an external person or team to handle your bookkeeping needs. These third parties specialise in the field and leverage technology to perform financial reporting, payroll processing, or inventory management tasks.

As far back as 2019, 33% of respondents (consisting of decision makers at accounting firms) in a ForrestBrown survey were either outsourcing or intended to. For certain, that figure has increased today because more businesses have realized its value.

Earlier, we cited an inability to balance managing an increased workload and scaling your firm as a reason to consider outsourcing bookkeeping. But it’s not the only reason. If you want to save time, increase your profits, be more productive and efficient, or keep up with market changes, jump on this trend.

Some Outsourcing Bookkeeping Related Terms

Like any niche, bookkeeping outsourcing has its share of insider language. Some of them include:

• Offshoring

Offshoring is the process of hiring an external accountant or bookkeeper in another country. Firms do this to take advantage of lower labor costs. E.g. A CPA practice in the United States outsourcing to a team in the Philippines.

• Onshoring

This is the opposite of offshoring. It’s the outsourcing practice where you hire bookkeeping service providers in the same country as you are. There are many reasons for choosing this option, such as ease of communication, cultural compatibility, and a desire to build local partnerships.

• Hybrid

A hybrid approach is the best of both worlds. It combines both onshore and offshore outsourcing to satisfy the firm’s needs. For instance, a practice might outsource complex accounting tasks requiring specialized expertise to an onshore provider. Then, delegate more routine tasks like data entry to an offshore provider in Nigeria because they charge less.

This model saves even more costs (but not at the expense of quality), reduces dependency on a single model, and guarantees round-the-clock operations due to time zone differences.

• Nearshoring

Nearshoring is similar to offshoring. The difference is the country you’re delegating to is nearby. It’s not as far as offshore countries. E.g. delegating from America to Canada or Mexico.

Nearshoring allows both parties to collaborate in real-time or near-real-time. And it’s still cheaper than onshoring or hiring an in-house team.

Benefits of Outsourced Bookkeeping

Let’s look at a real-life example. In 2014, a tax compliance and accounting firm had a challenge. They wanted to improve the quality of client bookkeeping service. All so their accountants could more effectively complete tax compliance and have more time to offer business advisory services.

What did they do?

They hired an offshore team through Beepo. The result? “Our (bookkeeping) processing times have been reduced by 50%, which has had an immediate positive result on our bottom line,” according to their Managing Director.

Outsourcing bookkeeping is a game changer for firms like yours. It has multiple benefits, among which include the following.

Cost Savings

Hiring and maintaining an in-house bookkeeping department is more expensive than hiring a third party. For an internal team, you’ll need to spend money on training, salaries, benefits, infrastructure costs, etc.

With outsourcing, you save a ton of money as you only pay for the services you need. You’re not paying for overhead costs associated with an in-house team. This cost-effectiveness allows you to divide resources more efficiently. And direct the saved funds toward business growth.

Concentrate on Core Competencies

Bookkeeping is a time-consuming task requiring meticulous attention to detail. Delegating this responsibility can free up time and resources. This allows you to focus on your strategic and advisory role to clients to deliver higher-value services, including financial analysis, consulting, and strategic planning.

Expertise

Here’s another benefit. You gain access to the wealth of experience and in-depth knowledge these specialists have from managing financial records for various clients.

Leveraging their expertise guarantees professionals who can deliver quality results handle your bookkeeping needs. They can also navigate complex financial transactions and provide expert advice whenever you need it.

With this, you’re assured your clients’ financial records are in capable hands.

Scalability

As the firm expands its client base, the volume and complexity of bookkeeping needs tend to increase. Outsourcing allows the firm to adapt to these changing needs easily. This is because you can scale up or down as these bookkeeping services scale their support up or down based on your requirements. They can always meet your bookkeeping demands, regardless of fluctuations in workload.

This flexibility lets you manage bookkeeping tasks while focusing on serving your clients in other roles like CAS.

Improved Data Protection

Few accounting practices have as sophisticated a security system as these contractors. Because it’s their speciality, they spend a lot of money and time putting advanced measures and protocols in place to secure sensitive financial data. That means your clients’ information is safer with them than if you were to manage it internally. There is less risk of a data breach.

Enhanced Data Accuracy

Good external service providers deliver accurate, consistent financial records. They combine their expertise and modern tools to produce precise and error-free work.

The contractors also ensure reports are regulatory compliant to help the business owners make informed decisions.

Bookkeeping Services You Can Outsource

“Bookkeeping” is the general term, but here’s a list of specific services under this broad umbrella.

1. Payroll Processing: One of the services businesses could contract your practice for is payroll processing. It involves managing employee compensation, like salaries, wages, deductions, benefits, and tax withholdings for the business.

2. Data Entry: This is one of the fundamentals of bookkeeping. If you have disorganized or inaccurate data, it will affect financial analysis and decision-making. Accurate data entry takes patience, time, and focus. It’s a task best left to professionals.

3. Financial Reporting: To prepare financial statements, you’ll first need to gather the necessary data, reconcile the accounts (A.K.A verify their accuracy), and classify the information into categories like income, expenses, assets, liabilities, and equity items. Next, prepare the financial statement components, including income statement (Profit & Loss), balance sheet, and cash flow statement. Then, review and share with interested parties.

As you well know, it’s not an instantaneous process. Use your time better by contracting providers to handle this task. Once you receive the reports they prepare, review and add your spin. This means interpreting and analyzing the report so your clients can understand their financial performance.

4. Bank Reconciliation: To “reconcile” bank records means to compare the bank records to the company’s internal records to ensure they match. It makes for great financial hygiene, but it can be tedious. Fortunately, it’s one of the services you can outsource.

5. Accounts Payable and Receivable Management: Managing Accounts Payable (AP) includes processing invoices, disbursing payments, communicating with vendors, and controlling expenses. While managing Accounts Receivables (AR) includes generating client invoices, collecting payments, reconciling records, and controlling credit.

Doing both takes considerable administrative effort. You’re better off outsourcing them if you wish to grow fast.

6. Expense Tracking: Businesses track their expenses because it gives them a clear overview of their spending. It also helps them identify areas of excessive costs and make informed decisions to improve profitability. Expense tracking is essential to bookkeeping, but a trusted third party can handle it for your clients.

7. Cash Flow Management: Another service you can outsource is cash flow management. It covers monitoring and tracking the in and out movement of money. Furthermore, preparing forecasts, projections, and reports based on the cash flow trends.

8. Audit support: Audits ensure compliance with financial regulations and maintain transparency. Yet, they can be quite complex, not to mention time-consuming. Instead of conducting them yourself, you can engage professionals. That way, you get to avoid expensive mistakes and compliance issues. All the while keeping your firm’s reputation for accuracy.

Factors to Consider When Selecting an Outsourced Bookkeeping Provider

You shouldn’t choose an external provider lightly. If you make the wrong choice, you’ll lose money and time. To prevent this, look out for the following elements.

Experience

First, consider how long they’ve been in business. Even though it’s not a foolproof determiner, logic dictates the longer a person or business has been operating, the more reliable they are. Remember, your own reputation is at stake. So choose a more experienced person to handle your needs, so you don’t disappoint your clients.

Industry Expertise

Go for contractors who:

• Serve or have served accounting firms like yours,
• Professional organizations like the Association of Chartered Certified Accountants(ACCA)have accredited,
• Have certifications such as Certified Public Accountant(CPA), The Chartered Institute of Management Accountants(CIMA), or Certified Bookkeeper.

These types of professionals will fulfil your needs better. That’s because they have detailed knowledge of your niche and can bring valuable insights only an insider knows.

Security

Security is crucial when it concerns financial information. Ensure who you’re outsourcing to has systems and technology in place to secure the data you give them. Required systems include firewalls and network security, data encryption, and access controls so only authorized people can access your information.

Pricing

The pricing structure is another important factor. Do they charge on a fixed-cost basis, hourly, or per task? Does their pricing fit into your budget? Choose a provider whose pricing structure matches your needs and who gives the best value for money.

Reviews

Research the reviews of a bookkeeper first before enlisting their services. Check what the overwhelming majority is saying about them. If you know any past or current customers, ask about their experience. It goes without saying, but look for another bookkeeper if you get more negative reviews than positive ones.

Service Scope

Another thing to watch out for is the range of bookkeeping services the service provider offers. Ideally, they should be able to handle all services you require. From basic tasks to more complex ones like cash flow management or audit support. This is so you don’t have to contract many providers, causing a more difficult-to-navigate situation.

Responsiveness

Good communication contributes to a successful outsourcing partnership. Pick a provider who is responsive and accessible. They should also have great customer support.

How Much Does Outsourced Bookkeeping Cost?

The cost varies depending on the provider’s experience level, location, and work type (+ volume) you’re delegating.

On average, most bookkeepers charge $50- $100 per hour. Or $250-$2,000 per month/$12,000 per year.

If you compare this with the average total compensation — salary + benefits — of ​​$66,086 for an in-house bookkeeper in the US, you’ll see this method is cost-effective. Especially considering you’ll need to hire more than one bookkeeper.

Ultimately, total costs for assembling an internal bookkeeping team can run up to a quarter of a million dollars or more. Whereas outsourcing bookkeeping services takes a few thousand dollars.

Managing Your Outsourced Bookkeeping Team Tasks

No doubt, managing an outsourced accounting service team in addition to your regular team is challenging. It can get overwhelming fast. It’s also easy for messages and deadlines to slip through the cracks.

To resolve this, set up a practice management software to keep track of everything and everyone. One such software is Financial Cents.

We’re great at helping accounting firm owners run a smooth operation. Send your external team an invite link and create a project for them. That way, you’ll stay aware of everything going on.

Track the work of your outsourced bookkeeping team with Financial Cents.